Your Adult Child Needs Financial Help: Now What?

Sep 2, 2016

In an ideal world, your children would complete their education, launch their career and set out on a lifetime of financial independence. As many baby boomer parents are learning, however, this isn’t an ideal world.

A 2014 study by American Consumer Credit Counseling found that one-third of all American households provide some form of financial support to grown children.1 That support can have a substantial financial impact. A study from Hearts & Wallets found that baby boomers who do not support adult children are twice as likely to retire comfortably as boomers who do provide support.2

Even knowing the impact, though, it can still be difficult to turn away a struggling child. Perhaps your child owned a business that went under. Maybe he or she is going through a difficult stage in their career. They could be struggling with student loans, or possibly even a costly personal event, like divorce.

You may want to help them, but you also don’t want to sacrifice your financial stability. The good news is there are alternative ways to provide assistance without dipping into your personal savings. Below are a few tips on how to handle their request for help:

Offer nonfinancial support.

Your child may want cash to help them through their rough stretch. However, there are other ways to provide assistance. Think of ways to help that don’t require you to take money out of your bank accounts or retirement savings.

For example, you could let them live with you for a short period and ask for only a minimal amount of rent. You could watch their children, allowing your kids to save money on child care. As a bonus, you’d get to spend more time with your grandchildren.

You could also tap into your network of co-workers and associates, especially if your child needs career help. Perhaps you could help your child set up coffee or lunch meetings to discuss potential job opportunities.

There are a lot of ways to provide assistance. Cash isn’t the only form of support.

Work with them to develop a plan.

Often, grown children will ask for money because they can’t think of any other possible solutions. While they may need cash, they may need your guidance even more.

Sit down with them to analyze how they reached this point and what they can do moving forward. Take an open and consultative approach. Don’t judge them or scold them. Rather, be a good listener and try to be constructive in your advice.

You could help them adjust their budget so they can live within their means. You might call their credit card companies with them to request lower interest rates or payments. Maybe you could help them identify an educational program that could advance their career.

They may be asking for money, but your guidance and advice could be even more valuable.

Set formal terms for financial assistance.

In the end, it may be that money is the only form of support that helps. If you do provide money, do so in the form of a loan, not a gift. Create a written document governing the terms of the loan and set a firm repayment schedule.

If they resist, share your own retirement planning challenges. Let them know how you could be impacted if the loan isn’t repaid. Also, let them know that if you can’t retire comfortably, it could be you asking them for help in the future.

For further assistance, contact us. We are happy to sit down with you and your child and develop a plan that works for both parties. Let’s connect soon!

1http://www.bloomberg.com/news/articles/2015-03-05/parents-risk-retirement-to-support-millennial-kids
2http://www.heartsandwallets.com/baby-boomers-whove-cut-apron-strings-for-adult-kids-twice-as-likely-to-be-retired-than-ones-who-havent/news/2015/03/
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15857 – 2016/6/27